Valeant ups the ante for Allergan instead of waiting for rejection

By Russ Britt

After failing to win the hearts and minds of Wall Street, Valeant Pharmaceuticals International Inc. didn’t wait for a formal rejection of its revised bid for Allergan Inc. earlier this week. Instead it upped the ante for the Botox maker on Friday.

Valeant’s bid is $72 a share in cash and 0.83 shares of its stock — which amounts to about $117 a share — for every Allergan share. Allergan shares jumped on the news, climbing more than 7% at one point. In recent action, Allergan was up 6% to $168.29, still well below Valeant’s offer price. Valeant added 1.6% to $142.41.

On Wednesday, Valeant outlined what it hoped would be a well-received increase in the offer price for Allergan, but analysts largely panned it. That offer for $58.30 in cash and 0.83 Valeant shares brought the sale price up to $49 billion from $46 billion. This new bid is more than double the increase made by Valeant in its last bid.

It could go up another $25 per share in value if Allergan’s experimental vision-loss drug Darpin proves to be a valuable asset, but that also was a feature of Wednesday’s bid.

William Ackman, chief executive of Pershing Square and holder of 9.7% of Allergan shares, said he would forego cash and take payment for his part of the deal in Valeant stock. Ackman, an activist investor who has been pressing Allergan for the deal, also said he would give up $600 million in value to other Allergan shareholders, or roughly $20.75 a share, in an attempt to show shareholders that Valeant has room to grow.

Recent criticism of the company claims that it has grown in recent years only through a series of acquisitions. Wall Street analysts said on Wednesday that Valeant’s last bid doesn’t take Allergan’s growth potential into account. They added Allergan could lose value through a combination with Valeant.

“We believe that our gesture to the other Allergan owners makes an extraordinarily strong statement about our belief in the long-term value of this highly strategic business combination,” Ackman said in a press release.

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